U.S. April Home Resales Soar 4.5% to Record 7.18 Mln (Update1)
U.S. April Home Resales Soar 4.5% to Record 7.18 Mln
May 24 (Bloomberg) -- U.S. sales of previously owned homes unexpectedly soared to a record 7.18 million houses, condominiums and co-ops at an annual rate and prices soared, as surprisingly low mortgage costs fueled buying, a private group said.
Resales increased 4.5 percent, the National Association of Realtors said today in Washington. The median price for all housing types rose 15.1 percent in April to a record $206,000, the biggest increase in a quarter century, compared with a year earlier, supporting Federal Reserve President Alan Greenspan's assertion last week that there is a ``little froth'' in regional markets.
Mortgage rates have fallen in recent weeks, defying expectations, and chief economist David Lereah at the Realtors association said buyers were taking advantage of the opportunity to buy. Job gains also supported purchases, and home resales may exceed last year's record of 6.78 million, he said.
``A new record is a bit unexpected, but so is the performance of mortgage interest rates, which have been lower than forecast,'' Lereah said. ``Certainly there are some select areas where there could be some `froth'.''
``When we look at recent job gains, we see all the positive factors coming together to coincide with a powerful demographic demand for housing,'' Lereah said.
Single-Family Houses
Single-family houses accounted for most of the increase in April, rising 4.5 percent to a record 6.28 million-unit pace from 6.01 million in March. Sales of condos and co-ops rose 4.8 percent to 899,000. Sales increased in three of four regions.
The increase in the median price was the biggest since November 1980.
The 55 estimates in the Bloomberg News survey for resales ranged from 6.80 million to 7.15 million. The previous monthly record of 7.02 million was set in June.
Sales received a boost from 30-year mortgage rates that have exceeded 6 percent only twice since the end of July, and they dropped to 5.71 percent last week, according to Freddie Mac, the No. 2 provider of money to mortgage lenders, after Fannie Mae. That compares with a four-decade low of 5.21 percent in June 2003. The average rate for the past decade is 7 percent.
``Generally, the boom hasn't calmed yet, especially as mortgage rates fall,'' said Timothy Rogers, chief economist at Briefing.com in Boston. Long-term Treasury rates that form the basis for mortgages have fallen amid investor expectations that inflation is under control.
Lereah said today the Realtors may lower their forecast for 30-year mortgage rates to 6.1 percent for the end of the year. That compares with forecasts of 6.2 percent and 6.4 percent earlier this month.
New Homes
A more current measure of housing demand, sales of new homes, may show some slowing from March. New-home sales may have fallen to 1.325 million in April, from a record annual pace of 1.431 million in March, according to a separate survey before a report due tomorrow from the Commerce Department. Last year's total of 1.2 million was a record.
Sales of new homes are tabulated when contracts are signed, while existing home sales are tabulated at closing, often a month or two after the contract.
Jobs were a contributor to demand. Unemployment was 5.2 percent in April, down from 5.5 percent a year earlier. The economy added 2.2 million jobs in 2004, the most since 1999. Non- farm payrolls have expanded an average 211,000 a month so far this year, close to the 217,000 in the first four months of 2004.
U.S. Population Growth
The U.S. population grew 1 percent to almost 291 million people in the year that ended July 1, figures from the Census Bureau show. Forty-five percent of that growth was from immigration.
The real-estate and construction industries are pillars of an economy that 63 economists surveyed by Bloomberg forecast may grow 3.4 percent this year, compared with 4.4 percent last year. Residential construction, when adjusted for inflation, is expected to grow 3.4 percent this year, the National Association for Business Economics said in a forecast released yesterday. The group also forecast the economy would grow 3.4 percent, and a Bloomberg News survey of 63 economists taken April 29-May 6 has an identical forecast.
The industry also generates purchases of furnishings, appliances, paint, carpeting and fixtures.
Lowe's Co., the world's No. 2 retailer of home improvement products, reported last week that its first-quarter earnings rose 31 percent, helped by expanded remodeling services and reduced costs of goods.
``Employment, household incomes and housing turnover individually and in combination indicate a very favorable climate for the future growth of Lowe's and the home improvement industry,'' Gregory Bridgeford, vice president of business development at Lowe's Cos., said on a conference call May 16 from the company's Mooresville, North Carolina, headquarters.
Greenspan and `Froth'
Demand for houses as residences and as investments has helped drive price up more than 10 percent a year in parts of the country.
Greenspan, the Fed chairman, is among economists who say the price increases can't go on indefinitely.
``There are a few things that suggest, at a minimum, that there's a little froth in this market,'' he told the New York Economic Club on May 20. ``This big price surge is going to soon simmer down.''
Banks and lending officers see no sign of letup in sales in the immediate future, Michelle Ashworth, managing director of asset management at Wachovia Corp., said May 20 in a telephone interview from Charlotte, North Carolina.
Wachovia, the biggest lender in the Southeast, is ``on track to hit or slightly exceed'' its half-year mortgage-business targets, she said.
``We are moving into peak months for home sales cyclicals, and there is nothing we are seeing to lead us to believe that the trend won't be robust over the summer,'' she said.
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
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